The key problem, however, was primarily that the Phillips curve lacked a distinction between the short run and long run timeframes. As the accompanying diagram shows, changes in the structure of the economy (such as those caused by exogenoussupply shocks) shift the short-run Phillips curve either up or down, such that any given level of unemployment corresponds to a higher or lower price level. According to this view, the inverse relationship between inflation and unemployment still holds, though the precise values of each that correspond to one another at any given short-run equilibrium may vary when supply side effects are at work.

The Long-Run Phillips curve (LRPC) is drawn as a vertical line at the NAIRU (the Non-Accelerating Inflation Rate of Unemployment), and exemplifies the idea (adopted primarily by neoclassical economists) that in the long run, the natural rate of unemployment will remain constant at the NAIRU, though the corresponding rate of inflation may change over time.